RBI retains GDP growth projection at 6.50%; cuts retail inflation estimate by 30 bps

Reserve Bank of India (RBI) Governor Sanjay Malhotra
| Photo Credit:
SHASHANK PARADE

The RBI has retained the FY26 GDP growth forecast at 6.50 per cent even as Governor Sanjay Malhotra emphasised that the Indian economy presents a picture of strength, stability and opportunity.

While the retail inflation projection for FY26 has been lowered to 3.70 per cent from the earlier estimate of 4 per cent, the Governor noted that “growth remains lower than our aspirations [of 8 per cent] amid challenging global environment and heightened uncertainty”.

On growth, Malhotra underscored that India’s strength comes from the strong balance sheets of the five major sectors — corporates, banks, households, government and the external sector.

Further, there is stability on all three fronts – price, financial and political – providing policy and economic certainty in this dynamically evolving global economic order.

“The Indian economy offers immense opportunities to investors through 3Ds – demography, digitalisation and domestic demand. This 5x3x3 matrix of fundamentals provides the necessary core strength to cushion the Indian economy against global spillovers and propel it to grow at a faster pace,” said Malhotra.

CPI (consumer price index) inflation for the financial year FY26 has been projected lower at 3.7 per cent (4 per cent) — Q1 at 2.9 per cent (3.6 per cent); Q2 at 3.4 per cent (3.9 per cent); Q3 at 3.9 per cent (3.8 per cent); and Q4 at 4.4 per cent (unchanged) — with the risks being evenly balanced.

“The near-term and medium-term outlook now gives us the confidence of not only a durable alignment of headline inflation with the target of 4 per cent, as exuded in the last meeting, but also the belief that during the year, it is likely to undershoot the target,” said the Governor.

On both inflation and growth fronts, Malhotra underscored that the Indian economy is progressing well and broadly on expected lines.

Strong macroeconomic fundamentals and benign inflation outlook provide space to monetary policy to support growth, while remaining consistent with the goal of price stability, he added

domestic growth

“As global environment remains uncertain, it has become even more important to focus on domestic growth amid sustained price stability. Accordingly, today’s monetary policy actions (50 basis points repo rate cut from 6.00 per cent to 5.50 per cent, change in monetary policy stance from “accommodative” to “neutral” and 100 basis points cut in cash reserve ratio), should be seen as a step towards propelling growth to a higher aspirational trajectory,” said Malhotra.

Published on June 6, 2025